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Treasury Dept Announces New Series I Bond Rates

The U.S. Department of the Treasury this past Tuesday released an announcement that Series I bonds will now be paying 6.89% annual interest through April of 2023, down from the previous rate of 9.62% that had been offered since May. This rate becomes the third highest rate since the I Bond’s inception in 1998 and investors can lock in this new rate for 6 months as long as they complete their purchase any time before the end of April ’23.

How Can These Bonds Be Purchased?

For individuals looking to purchase these assets, it can be done so online though TreasuryDirect, an official website of the United States Government.  Purchasing power is limited to $10,000 per individual, however, you can also use your federal tax refund to buy an extra $5,000 in paper I bonds. TreasuryDirect sold a record $979 million of the I bonds just on October 28th, which was more than the total bonds sold in the 3 years from 2018 to 2020.

How Does This Effect Older I Bonds

If you happened to purchase a bond before the latest announcement, the timing of when your rate changes and what it changes to will depend on when your purchased bond was issued. If you purchased your bonds in September in any given year, look for your rates to reset each year on March 1st and September 1st, If you happened to buy in June during any year, look for rates to be reset every December 1st and June 1st.

The headline rate may also be different than what you receive, taking into consideration the fixed rate remains set for the rest of your bond’s life. For example, If you bought the bond in September of ’04 it would have had a 1% fixed portion of their rate. The composite rate reset to 10.67% in September and will reset again to 7.51% in March of 2023, according to treasury data.

Wrap Up

This new announcement by the U.S Treasury Department is sure to raise plenty of questions about previously purchased bonds and their new rate status, as well as how this changes future purchases of these bonds. If you need any assistance on these securities, or want to know of more potential investments, give us a call and we can provide you with a clearer understanding.

 
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